Is OYO Hotels the next WeWork of the hospitality industry?
— 8 experts shared their view
view details of this viewpoint
Funded by SoftBank, which also bankrolled WeWork, today OYO has a a valuation of $10 billion (more than Choice Hotels and Wyndham Hotels combined) and boasts being the fastest growing chain in the world with over 1 million rooms in its portfolio. Beneath the PR glitz some industry experts see major structural and business model flaws: overhyped tech stack that often fails, "novel" revenue management approach of pursuing occupancy at any cost by lowering rates in periods of peak demand without the approval by ownership, as well as lack of brand recognition among the traveling public, forcing Oyo to rely on third-part resellers like Airbnb, HotelBeds, OTAs, etc. Is Oyo Hotels and Homes a great success story or is it another example of a cash-burning startup that will crash the moment cash infusions dry up?
Co-Founder at TRAVHOTECH
The overall scenario seems a good advertisement for brand power, although perhaps gone slightly awry following the current 'rapid saturation' approach to business growth. The first factor that is apparent to me is that OYO's target market has been the based upon lower-tier accommodation products, which has been without genuine at scale brand representation across countries or continents and certainly in their home markets. The second factor is that the base of the business began in India in basic/lower tier accommodation that would be less sophisticated operationally and probably without existing technology platforms.
With industry press trumpeting the value of upscale big brands, owners' interest in a brand on top of systems and performance commitments is understandable. Particularly where there is no prior affiliation. Low hanging fruit.
It's no small matter to build a functional cross-border customer, distribution and hotel operation technology platform. Plenty of anecdotal evidence to support that challenge in our industry. Stepping across international borders would also be expected to bring about some learning curves for all involved. Meeting a more sophisticated operator/owner combination who is savvy with distribution and revenue management practices would expose limitations, particularly as OYO looks to ascend the accommodation scale/move to more developed countries or replace incumbent brands.
From an international perspective, I feel it is too early to pass judgment on OYO's overall commercial success. From the brand footprint view despite some noise and detractors, owners continue to embrace and adopt the brand. This aspect of the business would appear wildly successful thus far...
The motels/hotels/guesthouse/BnB OYO manage were already there. If OYO should fail the bricks and mortar will remain after the brand is gone.